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Mon, 03 Aug 2015 00:29:42 +0000enhourly1http://wordpress.com/http://1.gravatar.com/blavatar/bf69214e83fdd5520e4b5d91ba3b7d64?s=96&d=http%3A%2F%2Fs2.wp.com%2Fi%2Fbuttonw-com.png » Canadian dollarhttp://news.nationalpost.com
All the loonie bulls have vanished in just one week. What’s up with that?http://business.financialpost.com/news/economy/all-the-loonie-bulls-have-vanished-in-just-one-week-whats-up-with-that
http://business.financialpost.com/news/economy/all-the-loonie-bulls-have-vanished-in-just-one-week-whats-up-with-that#commentsMon, 25 May 2015 14:06:09 +0000http://news.nationalpost.com/?p=779896

The Canadian dollar’s massive rally over the past three months disappeared in thin air last week. Now economists are predicting it could fall as low as 76 cents by June. What does the sudden reversal say about our country?

Politics is alive with the praises of a diversified economy. Some say that Canada should have one; others say that it already does, but both sides agree that it’s a goal to which Canadians should aspire. There’s even a homespun metaphor: “Don’t put all your eggs in one basket.” It’s just basic economics, right?

Well, no, it isn’t. In fact, it’s the exact opposite of basic economics. Adam Smith’s observations of the workings of a pin factory taught him — and us — the benefits of specialization. David Ricardo taught us that instead of aiming for a diversified economy in which 19th-century England produced both wine and cloth, it should specialize in the production of cloth — for which it had a comparative advantage — and import wine from a country such as Portugal, which had a complementary comparative advantage.

This is at times a difficult concept to grasp, but if there’s any idea that can claim to be “basic economics,” then surely it must be comparative advantage. In a large economy, diminishing returns will prevent the complete concentration to a single industry, but there is no inherent advantage in adopting policies whose goal is to avoid the gains from specialization.

If the eggs-in-a-basket metaphor has any meaning, it has to do with risk, not the composition of output. Fluctuations in world prices will generate corresponding variations in the income generated by selling exports on world markets. Here, basic economics tells us to manage risk by means of capital markets: a diversified asset portfolio offers at least partial protection from the vagaries of world markets. This instrument isn’t always available — particularly in developing countries — and in these instances diversifying the domestic mix of output can act as a crude hedge against these risks. But of course Canadians have ready access to international financial markets and are making increasingly heavy use of them.

You hear a lot about the increase in debt loads, but not so much about the significantly larger increase in asset holdings

It’s instructive to look at how Canadians have been using capital markets to hedge against recent events. The first thing to note is that contrary to a popular meme, the benefits of the oil boom were not entirely frittered away. Even though the Alberta government does not have a Norway-style sovereign wealth fund — a decision that seems to be more popular among Albertans than it is outside Alberta — a significant portion of the extra income was in fact saved. Statistics Canada’s data for national net worth — household, corporate and government sectors — stagnated at around 330% of Gross National Income (GDP plus a correction for income earned outside Canada) between 1990 and 2005. Since then, the ratio of net worth to income has jumped above 400%. You hear a lot about the increase in debt loads, but not so much about the significantly larger increase in asset holdings.

The other point is how Canadians have been hedging against exchange rate risk. According to the Bank for International Settlements, Canada’s real effective exchange rate — an index that includes our major trading partners and corrects for changes in price levels — increased by almost 50% between 2002 and 2012. This increase in the buying power of our dollar on world markets provided a significant boost to Canadian incomes. Of course, there was always the chance that these gains would be reversed — and indeed the real exchange rate has depreciated by 10% since 2012.

A simple hedge against depreciation is to buy foreign assets: if the dollar falls, then the value of assets denominated in other currencies will automatically rise. And buying foreign assets is what Canadian investors have done. Even as the exchange rate appreciation sharply reduced the value of foreign holdings, Canadian purchases expanded even faster so that holdings of foreign assets kept pace with GNI. This strategy has already begun to pay dividends: the decline in the Canadian dollar has already increased the value of foreign holdings by almost 40% of GNI over the past two years. It’s probably not a coincidence that estimates for national net worth have also increased by more than 30% of GNI during this time.

The eggs-in-a-basket metaphor is a much less useful guide for economic policy

Diversification makes eminent sense as a principle for asset management – and asset managers, public and private, have already learned this lesson. Given the current circumstances, many Canadians would probably be relieved to learn that some 69% of the assets managed by the Canadian Pension Plan Investment Board are located outside Canada.

But the eggs-in-a-basket metaphor is a much less useful guide for economic policy. Diversification has been the driving force behind any number of ill-conceived ‘”industrial policies” whose effect is to divert labour and capital away from the sectors where they are most productive. These efforts may succeed in producing an economy that is more diversified — but also less prosperous. It’s just basic economics.

The loonie shed 0.79 of a cent to 79.08 cents US, its lowest level since early April, 2009. It hasn’t been helped by the recent interest rate cut

]]>http://business.financialpost.com/2015/01/29/canadian-dollar-hits-fresh-multi-year-lows-below-80-cents-us/feed0stdloonieSIZEDKelly McParland: We didn’t learn from the last oil surprise. We probably won’t learn from this one eitherhttp://news.nationalpost.com/full-comment/kelly-mcparland-we-didnt-learn-from-the-last-oil-surprise-we-probably-wont-learn-from-this-one-either
http://news.nationalpost.com/full-comment/kelly-mcparland-we-didnt-learn-from-the-last-oil-surprise-we-probably-wont-learn-from-this-one-either#commentsThu, 29 Jan 2015 14:32:22 +0000http://news.nationalpost.com/?p=688075

The latest wisdom on the value of the Canadian dollar is that it’s likely to fall to US75¢. That’s a revision on the previous wisdom, which was that it might seek a floor at US80¢. Which was a revision on the previous wisdom, which was taken aback that the dollar was falling so sharply at all. Which in turn had followed assurances that the dollar was strong, and likely to remain so.

The dollar’s decline is tied to the fall in the oil price, which collapsed overnight. No one saw it coming. Almost no one, anyway – there are always one or two professional iconoclasts who, by challenging every consensus opinion, occasionally get things right. But everyone else was in the dark.

Vladimir Putin certainly didn’t see it coming. If he’d had any inkling the rouble would fall by 60% and Russia’s borrowing status would be lowered to junk, the Russian president might have thought twice before invading the Crimea and Ukraine, or thumbing his nose at the sanctions that followed. The Bank of Canada didn’t see it coming. As Financial Post’s Terence Corcoran points out, in 2012 then-governor Mark Carney unambiguously predicted high oil prices were here to stay, and said they represented an ongoing boon to Canadians.

Adam Legge, president and CEO of the Calgary Chamber of Commerce, says the oilpatch was not caught entirely offguard. “In Alberta, we have all seen this before,” he told FP’s Claudia Cattaneo, which is unquestionably true. Alberta has been riding booms and busts since it first started removing oil from the ground. And it never does anything to prepare for the next one. If anyone in the oilpatch anticipated this slowdown, they have a funny way of showing it: jobs are being cut, dividends are being slashed, stock prices are collapsing, projects are being shelved. If anyone should be sensitive to the volatility of the oil business it should the industry itself, but private sector experts appear to have been no better prepared than the government economists who relied on their forecasts. Shell says it’s cutting international spending by $15 billion. Alberta’s government now expects a $7 billion hole in its budget. It’s all a surprise.

ALEXEY DRUZHININ/AFP/Getty ImagesPutin: No one told me

It’s also a lesson in how little we pay attention to history when it is inconvenient to do so. Before the oil crash, the biggest threat to strong commodity prices was deemed to be uncertainty in China. After several years of double-digit GDP increases, growth had fallen off to a mere 7% or so – enough to have any other country giddy with delight but viewed as a bad sign by markets and analysts who wanted more. China was the big issue; all the focus was on China. But in the end it was Saudi Arabia that did the damage.

Riyadh, the great ally of the West, was upset at increasing competition from the U.S., and surprised everyone by refusing to cut back oil production to keep prices high. The result is a giant hole in western economies that were still struggling to overcome damage inflicted by earlier mistakes. We’ve been here before: the first major oil shock, the one that turned oil into a floating international crap game, was launched when the Saudis and their allies in OPEC jacked up prices in 1973, sending the world into a tailspin. But that was 40 years ago. Who pays attention to stuff that happened 40 years ago?

PostmediaCarney: or me

In response to the impact of the latest crash, the new Bank of Canada governor, Stephen Poloz, cut the key interest rate, which in turn prompted banks to lower their lending rates, making it cheaper than ever to borrow money. The timing is terrible: Canadians are already deeply in hock — household debt is near record levels, at 162% of household income. But people continue to borrow in the blithe certainty that rates will never rise again. Cheaper loans can only exacerbate the situation, pushing housing even higher despite fears that prices in Canada’s three biggest markets are already at bubble levels, and waiting to burst. Calgary, closest to the oil frontline and the most heavily tied to its fortunes, could be the first to go.

The prudent thing would be for Canadians to practice some discipline and restrain themselves from borrowing. Governments, meanwhile, should set an example by putting a moratorium on spending, especially new programs. The three federal parties, despite the approach on a general election, should contain their urge to dangle costly new goodies before the electorate.

That would be the prudent thing to do. But how much do you want to bet that we don’t? The three parties have already started making promises, with money that might not now exist. People will continue to factor the lower interest rate into the price they can afford to overpay for a home. Prudence is generally something we practice in retrospect, when it’s too late.

One of the more persistent myths about prosperity is that it results purely from luck. Often, commentators credit the mere presence of oil, gas, potash and other natural resources for Western Canada’s recent (and presently fading) boom in investment, jobs and government revenues.

But Nigeria, South Africa and Venezuela all have natural resources in abundance. Yet on many prosperity measures from per person GDP to longevity, they lag far behind Hong Kong and Singapore, which possess no oil, gas or mineral deposits.

I note this enduring myth because Ontario and Quebec policy-makers might be tempted to believe a similar fairy tale: that a lower dollar will now magically transform Central Canadian economies.

A lower dollar might temporarily help a few businesses do a bit better; but the reason for a particular jurisdiction’s failure or success is more prosaic — it depends on getting the basics right, everything from the security of property rights and independent courts to tax levels and sensible (as opposed to burdensome) regulation.

At the sub-national level, a province needs smart policy on labour and land regulation. It also requires moderate tax levels.

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To understand why Ontario and Quebec are not poised to automatically replace the West as the economic engines of Canada, consider where oil and the dollar have been, and past trends.

Over the last several decades the monthly average per barrel oil price ranged from U.S. $11.35 (December 1998) to U.S. $133.88 (June 2008). The dollar was as low as 62 American cents (January 2002) and as high as U.S. $1.10 (November 2007).

So how has Central Canada fared during high dollar, low dollar and “yo-yo” oil prices over time? Let’s start with private sector investment.

From 1982 to 2013, the average annual private-sector investment (per worker) in Alberta was $45,842 followed by Saskatchewan ($35,458), British Columbia ($24,486), Ontario ($19,850) and Quebec ($18,271). By a wide margin, the West saw more investment (per worker) even when oil and natural gas and other resource prices were low.

Private-sector investment dollars are a “futures market” indicating where jobs will be created. Not surprisingly, unemployment rates have mostly followed investment flows. From 1982 to 2013, Saskatchewan (6.2%) had the lowest average annual unemployment rate, followed by Alberta (6.8%), Ontario (7.7%), British Columbia (8.9%) and Quebec (10.1%).

Unemployment rates can be lower if a province experiences a substantial outflow of people, especially among those of (mostly) working age. That was Saskatchewan until recently. For those between ages 15 and 64, Saskatchewan lost 115,245 people (from 1982 to 2014) on a net basis.

But here’s where the data — and the caveat for Ontario and Quebec — comes into play.

For Alberta, the worst period for interprovincial migration was between 1982 and 1989, when 81,134 people aged 15 to 64 left the province.

Quebec lost people in every single year since 1982, or 237,593 in total

After that, other than a small loss in the mid-1990s and a blip of a decline in the last recession, Alberta has gained people. In total, even with the steep 1980s-era losses, 339,381 people moved from other provinces to Alberta since 1982.

In contrast, while Ontario gained 53,083 working-age folks between 1982 and 2014, it hasn’t seen net positive migration numbers since 2003, and has been losing people ever since. Meanwhile Quebec lost people in every single year since 1982, or 237,593 in total.

B.C. has a mixed record in the interprovincial migration sweepstakes. It lost some people in the early 1980s and saw significant out-migration between 1998 and 2003, but has mostly gained working-age people — an extra 257,949 since 1982.

In short, despite past periods of low oil prices and a cheap Canadian dollar, since 1982 Ontario and Quebec have never overtaken Alberta and Saskatchewan in per worker private sector investment. And migration and unemployment rates have generally been healthier in the West than in Central Canada.

In Ontario and Quebec, future success will depend on the correction of poor policies that for years have hindered greater prosperity in those two provinces. That will require policy-makers to eschew magic bullet myths — such as how a low dollar will rescue Central Canada.

Show me a good loser and I’ll show you a loser. The old saying is doubly apt in defence procurement, where losing bidders always claim nepotism, corruption or incompetence.

But accusations that the government has sole sourced a military contract even larger than the one at the centre of the F35 fiasco may be more than just sour grapes on the part of those frozen out.

There was genuine shock in Ottawa defence circles when an apparently routine information session on the efforts to build a new warship fleet — Canada’s largest-ever defence procurement project — revealed, without fanfare, that Irving Shipbuilding in Halifax had been awarded the designation as prime contractor on the $26-billion procurement to build up to 15 ships.

Irving had already won the right to build the ships in its Halifax yard, but the job of prime contractor on the design phase could prove even more lucrative, since up to 70% of the value of the vessels is in the complex combat systems that are installed.

The role gives overall control of the management and delivery of all contracts – the going rate for which is typically 12-15% on every dollar spent, according to industry insiders.

No financial details on the Canadian Surface Combatant project have been released.

But the news that the contract had been awarded without a competitive tender ran around the town quicker than Wee Willie Winkie in his nightgown.

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“The price of the poker game has gone up without a competition,” said one lobbyist. “It’s great to have a Canadian company running a 30-year effort but what will it cost the taxpayer? If they’d held a competition, we could have seen five or six contenders.”

Others pointed out that the sole sourcing appeared to run contrary to the government’s much-vaunted Defence Procurement Strategy.

It certainly seems to violate government contract regulations that say sole sourcing is permissible “if only one person is capable of performing the contract.”

By handing the contract to a Canadian company, it may have fulfilled one of the procurement strategy’s goals, but it may not have gotten the best price, critics claim.

“The government wants 15 ships but they don’t have enough money for seven ships – and they have even less now. Nobody tested the market,” said one industry source.

A senior government official at Public Works said the selection process took place in 2011, when Irving was chosen as the lead yard for the surface combatant vessels. He said it was made clear “by exception” that the shipyard was the prime contractor. “But in the umbrella agreement signed by the shipyard, the Crown reserved the right not to make it the prime contractor. We wanted to do an industry analysis to make sure our intended course was the right one. It was clear to everyone that Irving was prime contractor during the construction phase. At issue was whether it was going to be prime contractor during the design phase.”

It certainly does not appear to have been clear to Irving that it was in line for the prime role in the design phase, since it launched a lobbying campaign pointing out why the shipyard building the vessels should have overall control when it came to managing subcontractors.

Contrary to suggestions that appointing Irving without a competition would raise the overall price, the government official said it would save money by avoiding the cost of having two contractors, each charging a percentage fee on every dollar spent. “It’s less risky, more efficient and likely means less cost,” he said.

The unusual manner in which the news leaked out – via a Public Works bureaucrat at an information session – led to suggestions that the ministers responsible have been blindsided.

But a spokeswoman for Diane Finley, the Public Works Minister, said the ministerial working group responsible for military procurement was told about Irving’s selection at its last meeting.

The senior bureaucrat at Public Works said that it was an administrative contractual decision that did not have to get Cabinet’s blessing.

But this is a contract of unprecedented value.

To let the news slip out in the way it did is simply asking for trouble. To the surprise of many, the rationale is that a multi-billion-dollar contract has been awarded on the basis of a four-year-old agreement that did not explicitly state Irving had already been chosen as prime contractor.

Yet again, questions are being asked about Canada’s defence procurement system, and yet again the answers lack conviction.

The dollar’s current roll has taken it to about 94¢ (U.S.). That’s certainly an improvement over the lows of the last few months, but it has no chance of catching up to 150 years ago. On July 11, 1864, it did something that is beyond belief now, reaching an all-time high of $2.78 (U.S.). That was during the American Civil War, when shaky confidence in the U.S. dollar was further weakened by a Southern raid on Washington and Baltimore. It bottomed out at 36¢ (Canadian).

If the dollars were to be as far apart today as they were then, you could be enjoying the Mother of all cross-border shopping days. A 2014 Honda Accord coupe advertised in Buffalo for $24,415 would cost you $8,789 (Canadian). A 12-pack of Budweiser beer at $9.99 (U.S.) would be yours for $3.60.

There was cross-border shopping in 1864, too. Back then, Buffalo offered the added attraction of being by far the biggest city in the region. Its population was 90,000, about double Toronto’s. On Main street you could stay at the American Hotel, where newly elected President Abraham Lincoln gave a speech in 1861, or shop at S. Bergman, ready made clothing, which “always has on hand a large assortment of Cloths, Cashmeres, Vestings and Trimmings.”

Some merchants courted Canadians with ads in papers on this side of the border. In the St. Catharines Constitutional, Wilson C. Fox, “Dealer in Fruits, Oysters, Liquors and Cigars,” listed two Buffalo locations, one of which was next to the Metropolitan Theatre. It also touted a “Billiard Saloon, with seven of Sharpe’s best Tables.” Blodgett & Bradford advertised pianos “warranted to give satisfaction” for $150 to $350. The company specified payment in “Gold or Canada Currency.”

There was cross-border shopping in 1864. Back then, Buffalo offered the added attraction of being by far the biggest city in the region. Businesses there advertised deals, but only if you could buy in gold or ‘Canada Currency’

There was good reason for that. “The value of American currency is quite unsettled,” one newspaper reported that July. “The discount on it varying this week from 61 1/5 to 64 per cent.”

The problem for the U.S. dollar was the cost of the Civil War, which began in April, 1861, and ended four years later. During that period U.S. federal government spending rose from $66-million annually to $1.3-billion. This was immediately understood to be a huge threat to the American economy and to its currency. Indeed, the war with the South was just eight months old when Lincoln worried that it was bankrupting the North. He told one of his generals that Treasury Secretary Salmon Chase, “has no money and tells me he can raise no more … The bottom is out of the tub. What shall I do?”

What his administration wound up doing was taking many things for a wild ride, including the Canadian dollar, which prior to Confederation in 1867 was the currency of the united British colonies of Canada West and Canada East, now Ontario and Quebec.

Chase was at the centre of that wild ride. The treasury secretary was a ponderous but brilliant man, according to historians. Before joining Lincoln’s cabinet he was a Cincinnati city councillor, governor of Ohio and United States senator. Eventually he would be chief justice of the U.S. Supreme Court. Twice he lost the Republican presidential nomination to Lincoln, but never stopped believing he would have been the better choice. “Chase is a good man, but his theology is unsound,” another senator said. “He thinks there is a fourth person in the Trinity.”

When the war began both the U.S. and Canadian dollar were on the Gold Standard: They were at par, fixed at a value in gold and could be redeemed for gold. Tying currency to gold limited supply. There wasn’t enough money in circulation to finance the war. Chase solved that by going off the gold standard, to the dismay of many, including himself. “Gold and silver are the only true measure of value,” one banker said. “These metals were prepared by the Almighty for this very purpose.”

The paper dollars — called greenbacks because one side was printed in green — were not redeemable in gold, but it was widely believed they would be once the North won the war

Few people were more religious than Chase, but under his watch the gold heresy was compounded. The federal government started issuing paper money, which previously had been done by banks. Critics said the U.S. Constitution only allowed the government to “coin money,” not print it.

The paper dollars — called greenbacks because one side was printed in green — were not redeemable in gold, but it was widely believed they would be once the North won the war. That assumption lost ground every time the North had a military scare and in July, 1864, it had a big one. A Southern force of about 20,000 men struck north, threatening to occupy both Washington and Baltimore. “At daybreak a general alarm was sounded throughout the city,” the American and Commercial Advertiser of Baltimore reported on the 11th. “People rushed from their houses with guns on their shoulders.”

The price of gold soared, pushing up the Canadian dollar, which was still tied to it, and pushing down the greenback. “The extraordinary advance in [gold] is absorbing the the currency of the country,” The Pittsburgh Commercial said. “The pressure for money is being felt at all the commercial centers, East and West.”

Fortunately for the North, reinforcements arrived in Baltimore and Washington and the Southern raiders withdrew. Nine months later, the South surrendered and the war was over. The United States had prevailed and its economy, and dollar, was saved.

But it’s still worth recalling the events of 150 years ago today. The greenback was never so weak again and the Canadian dollar never so strong.

Being Prime MinisterOh, it’s this old chestnut again: “While Canada has been famed for its blue-beret peacekeepers since the 1960s, the Harper government has allowed this peacekeeping tradition to wither away into irrelevance,” writesGeoffrey York in The Globe and Mail. Sigh. Once again: It is true that there are fewer Canadians (115) assigned to peacekeeping missions today than there were in 2005 (387), the last year of Liberal governance, and “that ranks Canada as just the 61st biggest contributor to UN peacekeeping missions, behind such world powers as Fiji, Togo, Yemen and Djibouti.” But there were also more Canadian peacekeepers in 2000 (568, good for 25th place), and far more (1,163, sixth place) in 1995. Mind you, the 1995 complement was still just 3.7% of the total and less than half of the first-place contributor, which was — fetch the smelling salts! — The United Warmongering States of America.

York’s point is that Africa needs peacekeepers and that Canada could provide them — and we’re sure Canada could. But we shouldn’t be sending troops anywhere to do anything, surely, to satisfy some hagiographic misapprehension about our military history. Fact: It was the Liberals who ratcheted down our peacekeeping commitment. There’s no point shouting at Stephen Harper about it.

The National Post‘s John Ivison sums up Stephen Harper’s Israel trip as “a memorable foreign excursion by a Canadian leader — and when was the last time we could say that?” But he wonders if anything concrete or lasting has been accomplished vis-à-vis Canada-Israel relations, as opposed to Harper-Netanyahu relations.

On the occasion of Jean Chrétien’s 80th birthday, for which he was duly feted, the Toronto Star‘s Thomas Walkom marvels at the partisan Liberal’s ability to applaud a man for “work[ing] to build and expand the great social programs of the 20th century” and the same man — at the same dinner — for “decimating these same social programs when, as prime minister during the 1990s, he slashed spending in order to eliminate the federal deficit.”

Finance Minister Jim Flaherty and “his protégé,” Bank of Canada Governor Stephen Poloz, “have been as one in talking down the dollar,” Postmedia’s Andrew Coyne argues — “and lo, they have got what they wanted,” namely, an “accelerating run” on the Canadian buck. “There’s nothing wrong with a falling dollar,” of course. But “a deliberate policy of devaluation … is no more to be desired than a policy of propping it up: both subordinate the proper objectives of monetary policy, domestic price stability, to an extraneous target” — namely, Coyne suspects, Southern Ontario’s struggling, vote-rich manufacturing belt, which could surely benefit from a devalued dollar.

“There is simply no longer a case to fully fund a sectarian education system whose teachings are at odds with the fundamental values of Ontario society,” the Globe‘s Konrad Yakabuski argues of Ontario’s Catholic school system. We have nothing to say except that he is, of course, correct.

The Star‘s Martin Regg Cohn more or less guarantees that Ontario Progressive Conservative Leader Tim Hudak isn’t backing away from making the province a right-to-work jurisdiction, as some have speculated — or if he is, it’s only to get through an ongoing by-election campaign in a riding where it wouldn’t play well.

Meanwhile, the Calgary Herald‘s Don Braid brings news of Alberta Premier Alison Redford’s own labour troubles: We’re just a week away from what Braid calls “a bizarre deadline imposed by the provincial government” for a settlement with provincial employees, at which point Redford could impose draconian new back-to-work legislation. Even if she doesn’t, Braid seems to think she has burned her formerly robust bridges with big labour.

The Quebec Liberals’ new principlesThe Liberals’ latest stance on the so-called “values charter” amounts to “compromising their principles just enough to make them unrecognizable,” Don Macpherson writes in the Montreal Gazette. They’re now OK with public servants wearing the hijab, but not the chador — which makes very little sense in that neither conceals the wearer’s face, both Lysiane Gagnon (in La Presse) and Richard Martineau (on his Journal de Montréal blog) note. Macpherson quips that the Liberals would “measure the exercise of a fundamental freedom the way the Office québécois de la langue française measures the non-French lettering on a commercial sign: with a tape measure.”

And for what? To pursue “a small number of votes they have no hope of winning away from the PQ anyway” and keep former now-departed caucus member Fatima Houda-Pepin happy, in Macpherson’s view — thus torpedoing leader Philippe Couillard’s reputation in the offing. Well played, guys.

Duly notedIn straightforward and gripping prose (translated into English by the Globe) Mylène Moisan of Le Soleil explains what it feels like to almost have your five-and-a-half-year-old son die of pneumonia because you didn’t get around to getting him a flu vaccine.

Stephen Harper’s “ability to appear in control is a significant political advantage, especially over the untested Justin Trudeau,” the National Post’s John Ivison observes — and Harper is very good at appearing in control, in large part because he “control[s] the perimeter around him” so ruthlessly. “People vote for personality traits like consistency and stability, especially if their own circumstances are improving,” and for many Canadians they are. The problem, as Ivison says, is that Conservative support has cratered for reasons unrelated to the economy. And “since the prime minister has no intention of bending to his critics, it is tough to see how the disaffected can be wooed back into the fold.”

Which would be unfortunate, in Richard Gwyn’s view, because he thinks Harper is being judged for “his character rather than his actions,” and that “at this point we may be better off having a son-of-a-bitch running the show rather than a caring, sharing charmer.” Canadian industry is dwindling, “our oil and gas boom is being overshadowed by the far larger American energy boom,” the public sector must shrink and “our universities cannot continue educating young people for jobs, as in the humanities, that simply don’t exist,” Gwyn argues in the Toronto Star. “Who better to get the nasty but necessary reforms and belt-tightening done than someone everyone loves to hate?”

Postmedia’s Andrew Coyne cannot fathom what Jim Flaherty thinks he’s up to with his recent public musings on interest rates (“the minister of Finance doesn’t set interest rates in this country,” Coyne notes: “the Bank of Canada does”); and on “where the dollar is going, and where he’d like it to go.” “When central bankers talk about [the value of the dollar] they succeed mostly in confusing financial markets,” Coyne argues. “But when finance ministers talk about it — or about the level of interest rates — they sow doubts about the independence of the central bank.” Worse, if “traders get it into their heads that the minister of Finance has a preferred value for, say, the dollar — and that he has the governor’s ear — they will start to test that assumption.”

Whereas Postmedia’s Michael Den Tandt thinks the current federal political fundraising model — small personal donations only — is leading to stupider, narrower and nastier “political discourse,” the Post’s Matt Gurney thinks it’s all worth it to not be forced to subsidize a political party just by voting for it. Agreed. We’ll entertain just about any campaign finance reform ideas except the return of the per-vote subsidy.

Against the argument that a society cannot coherently prohibit marijuana use while it allows alcohol use, Mathieu Bock-Côté deploys his standard cultural defence: Basically, it is more important that a society be allowed to set rules than that those rules make sense. “We forget that a society shapes its taboos according to its history,” he writes in Le Journal de Montréal. “This duty of consistency masks a refusal to take into consideration the uniqueness of each culture. Our society has historically privileged alcohol as a social lubricant. … Must we therefore stop sending the legal signal that drugs are dangerous?” Well, evidently not. But Bock-Côté’s appeal to history is a bit awkward, surely, considering that Canada outlawed marijuana based mostly on anti-Chinese sentiment and hysterical doomsaying about the drug’s effects. Not exactly a proud moment.

“There was a time not a decade ago when the ruling party would have seen the [Supreme Court’s] prostitution ruling as an opportunity to pull the [notwithstanding] clause out of its long-standing state of federal disuse,” the Star’s Chantal Hébert writes. But despite the Conservatives’ obvious displeasure at the Court’s ruling, she’s quite sure they won’t go there: It would “reinforce suspicions that a future Conservative government could limit or repeal abortion rights,” she argues; and it would basically dare the Parti Québécois to use the clause in respect of its secularism charter. (Surely it would do so anyway, though.) We, on the other hand, hope the Conservatives don’t use the notwithstanding clause because Canada’s prostitution laws are weird and nonsensical and don’t work, and are clearly in desperate need of redesigning, and the government should want to do so.

The Calgary Herald’s Don Braid reports that former Alberta MLA Ron Liepert is mounting the first credible challenge Rob “The Immovable Object” Anders has yet seen for his candidacy in Calgary. Braid suspects there will be fireworks. We’ll put some popcorn on.

“If the number of aboriginal and minority federal prison inmates is growing, it is not because of racism,” the Herald’s editorialists declare, offering absolutely nothing to back up this assertion. “It is because they are committing crimes.” So there.

The Post’s Kelly McParland thinks Immigration Minister Chris Alexander should put Texas Senator Ted Cruz out of his misery and cut whatever mysterious red tape is preventing him from renouncing his Canadian citizenship. Meanwhile The Globe and Mail’s editorialists, and Gerry Flahive, writing in the Globe, make light of the situation in typically self-conscious and un-funny Canadian fashion.

Duly notedThe Post’s Jonathan Kay entertaininglyexplains how he abandoned the world of expensive watches and embraced the world of crappy watches, which seem to tell better time than the expensive ones. We refused to wear a watch even before cellular telephony put a watch in everyone’s pocket — hello, there are clocks everywhere. Nowadays, we have no idea how watchmakers fancy or crappy stay in business.

Oh, and the Herald’s, Star’sand Globe’s editorialists would very much like you to get a flu shot, if you haven’t already.

Fresh off her endorsement of a movement to render O Canada gender neutral, author Margaret Atwood has endorsed an online petition to add gender diversity to the Bank of Canada’s new $5 and $10 banknotes. Instead of images of the Canadarm2 and a train, she wants pictures of women, currently only represented on our bills by the Queen. The National Post‘s Scott Stinson suggests 10 women who could fit the bill:

Library and Archives CanadaLet's not forget Nellie McClung...

Nellie McClung
The most well-known of the Famous Five who campaigned for the suffragette movement, McClung was so successful at expanding women’s rights that we are willing to overlook that whole temperance thing.

Roberta Bondar
Because astronauts are cool. This also has the added benefit of being easy to pull off: just drop a little drawing of Bondar in a spacesuit in behind the Canadarm and, boom, done and done.

Mary Pickford
America’s Sweetheart! (Seriously, that’s what she was called.) We can settle this whole Canadian-American thing once and for all by putting her on the $10 bill. YOUR MOVE, FEDERAL RESERVE.

Pamela Wallin
It’s the best way to ensure that the Senate expense scandal isn’t forgotten by the time the next election rolls around.

AFP/Getty Imagesand Margaret Atwood, herself.

Celine Dion
Look, she frightens me considerably, what with all the strutting around the stage and her pointy elbows flying everywhere, but 200 million albums sold is 200 million albums sold.

Ellen Page
Locking down the hipster vote.

Kim Campbell
There’s room on the back to include all the accomplishments of her time in office.

When it unveiled its new paperless, plasticized $20 bills in May 2012, the Bank of Canada touted its high-tech anti-counterfeiting technology. “This new $20 note fits the bill,” they said. Ha ha! Nice pun. Too bad they didn’t mention that little problem with them melting. There have been other complaints too. The Post‘s Steve Murray investigates:

Alexander Nemenov/AFP/Getty ImagesVladimir Krutov and his CSKA teammates Igor Larionov and Sergei Makarov formed one of the most potent scoring lines that hockey has ever seen,

Judging by a new survey of job attitudes, Canadians have either morphed into the world’s most optimistic nation, or we’re all living in fantasyland.

The annual Bank of Montreal Labour Day survey depicts a country feeling safe and secure in their jobs, happy with their lot, looking forward to another year of progress, and maybe even a raise.

Sixty-four percent of us feel comfortable with our job security, up 13 points on last year. More than four in ten believe their employer is growing and will be hiring more staff this year (up 13 points from 2011). And 39% are anticipating a little something extra in their paycheque sometime in the next 12 months, up 11 points from the previous survey.

Are we nuts?

Maybe it’s Twitter’s fault. Is it possible that so many Canadians now get their information in 140-character bursts, from friends and family hanging out at the coffee shop while following TMZ on their iPads, that we have no idea how dangerous the economic situation is at present.

Greece? You mean the place with the beaches? Are they having a seat sale or something?

The Euro? Uh, isn’t that the name of a train or something?

The U.S. economy? All that matters is that the strong dollar makes stuff cheaper in U.S. malls, right?

The more frightening reality is right there for everyone to see. Yesterday Finance Minister Jim Flaherty joined Bank of Canada Governor Mark Carney in lecturing corporate Canada for sitting on mountains of “dead money” they claim should be invested in the economy. Corporations are so wary of the economic situation they’re sitting on $550 billion in unused assets.

“The data showed that operating profits declined in 15 of 22 industries, with oil and gas, manufacturing and insurance posting the biggest declines,” it said.

“Of particular note has been the slowdown in profits for non-financial companies. When looking at firms outside of that sector, operating profits declined 5% to $52.2-billion, following a similar 5.1% decrease in the first quarter.”

The U.S. economy, on which Canadian trade is based, is going nowhere. Housing prices, which have been magically rising, are expected to start falling.

Are Canadians worried? Nah, not us.

The BMO survey does demonstrate the divide that separates the western half from the eastern half. If the country as a whole is optimistic, people in Manitoba, Saskatchewan and Alberta are delirious. Sixty percent of Albertans expect to see more hiring this year, 81% of Manitoba and Saskatchewan workers feel safe in their jobs, and 55% across the prairies see a pay increase in their future.

The other provinces aren’t quite so confident, and British Columbians seem particularly morose, but even there 60% feel their job is safe and more than a third expect a raise.

Maybe we’ve just all learned to put our faith in Stephen Harper and worry about something else, like the prospects of a lockout in the NHL. Or maybe it’s just too hard to get reliable financial news on Twitter.

Mulcair was in New Brunswick to boost the campaign of provincial NDP Leader Dominic Cardy in a byelection in the Saint John-area riding of Rothesay.

During his visit, Mulcair said the Canadian Association of Petroleum Producers is deceiving the public when it says there are regulations to ensure that shale gas fracking is safe.

“I met with the leadership of the Canadian Association of Petroleum Producers who gave me a lovely brochure, colour, glossy, explaining that they had a policy that all companies doing fracking had to reveal the contents of the fracking fluid,” Mulcair said Sunday.

“That representative of the Canadian Association of Petroleum Producers was out here pulling a con job, trying to make people believe that somehow they were regulating, somehow they had rules that were going to mean something.”

Mulcair called on the energy industry to tell the public what is in the fluid that is used in fracking.

“Here’s one tough question: If you think that your method of getting to that gas is safe, why won’t you reveal the contents of the fracking fluid?” he said.

“Because that fracking fluid contains known carcinogens and other very dangerous substances.”

Mulcair also said he supports the development of a west-to-east pipeline that would deliver energy and generate jobs in Atlantic Canada.

His comments come just over a week after he toured Alberta’s sprawling oilsands. At the time, he said he was surprised at the size of the operations and left determined to ensure it gets cleaned up.

He has also traded barbs with premiers from the West after he said that region’s booming oil sector was hurting other parts of Canada’s economy by driving up the dollar — a phenomenon known as Dutch disease.

Fracking, which refers to hydraulic fracturing, involves the use of high volumes of water and chemicals to fracture layers of rock to release pockets of shale gas.

The industry has argued that fracking is safe and sustainable and provides major economic benefits, an argument environmental groups reject.

There has been a public backlash to shale gas development in New Brunswick in recent months, including protests near exploration sites and at the provincial legislature.

Federal New Democratic Party leader Thomas Mulcair deserves some credit. After angering just about every political leader west of Manitoba with his accusations of environmental degradation and Dutch Disease, he got on a plane and actually took a look at the oil pit that has become the cri de coeur of the left.

Then he met with many of those political leaders and stood, for about 40 minutes, at a press conference in the Alberta legislature and explained his position to a province whose massive oil wealth is surpassed in size only by the chip on its shoulder.

Mr. Mulcair seemed patient and amenable during the conference, but three things stood out. The first was his refusal to back down on his fixation with the Dutch Disease, citing several recent studies he claims support the theory that Canada’s petro-fuelled dollar is having a disastrous effect on central Canada’s manufacturing sector.

Considering many of the journalists who wrote about these studies didn’t seem to actually understand them, it’s hard to fault Mr. Mulcair for gliding over their complexities as well. At this point, it would be best to point to an excellent Maclean’s article, which notes the issue is far more complex, and less cut-and-dried, than Mr. Mulcair would have us think. The second argument Mr. Mulcair made was that the profits of oil companies were being falsely inflated by the federal government’s refusal to enforce existing environmental legislation. Mr. Mulcair believes that if we started to crack down on oil sands environmental offenders, those costs would be internalized, profits would come down, and that would balance out the currency and thus, the economy — as if there were some perfect exchange rate that could bring harmony to all the land. (Although the NDP leader said no additional “Polluter Pay” legislation would be needed to accomplish this, he did advocate a cap and trade system that seemed unconnected to his currency deflation scheme.)

This thesis is totally insane. If the federal government were to fiercely enforce every piece of environmental legislation on the books, there’s no evidence to suggest it would make a significant dent in the profit margins of the many multinational oil companies operating in northern Alberta — much less have a major impact on the currency. If you’re trying to muck about with monetary policy, there are far more direct ways to do it than by using environmental legislation.

A currency’s exchange rate is set by the global market; how much our money is in demand relative to other currencies. It’s affected by dozens of economic factors, from interest rates, supply, GDP, etc. It’s weird alchemy, but as a federal leader, Mr. Mulcair needs to display a sound understanding of it.

That the government should be enforcing the environmental laws already on the books is an idea that stands on its own merits: If the NDP were focusing on water monitoring stations and dead ducks and tumour-ridden cancer fish, they would hear no objection from this quarter. However, Mr. Mulcair seems to be conflating a sound environmental rebuttal to the oil sands with an illegitimate economic one.

Mr. Mulcair’s hybrid thesis creates a superficially compelling sound bite that plays well in areas where Dipper politics are strong. But it doesn’t require a terribly large logic-stick to kill.

The third point that stood out in Mr. Mulcair’s position was the oft-repeated suggestion that “we” should be upgrading our bitumen at home instead of shipping the raw product abroad — as if commodity export were some atavistic practice unworthy of our advanced nation.

He even borrowed an Ethical Oil argument to make this point: Let’s use good-old-fashioned Canadian oil in favour of the black gold we’re importing from regions of conflict abroad. This idea has broad-based support across the ideological spectrum, and why shouldn’t it? It sounds like a great idea, and indeed there are attempts to encourage investment in this direction. “We” could create more jobs at home and secure our energy supply.

There is a whole separate debate to be had on the economics of domestic bitumen upgrading — in short, Canada is already sitting on excess capacity as oil companies move refining to areas with cheaper labour costs — but for purposes of discussing Mr. Mulcair, note that no one has seen fit to ask him whom he meant by “we.” Who is going to actually invest the billions of dollars that would be required to create those pipelines and refineries so “we” can all feel better about our local oil supply? Will the federal government do it? No, he said. The provincial government? No. Should the government incentivize private investment? No to that one, too.

Mr. Mulcair wants the private sector to do it. That seemed to be the extent of his policy on the matter. So he’s expecting an entirely independent private entity to take on the risks of his preferred means of economic development regardless of its economic viability. And “we” want a pony. This isn’t a policy, it’s a Christmas gift.

If private companies want to upgrade bitumen in Canada, few reasonable people would object. But upgraders and pipelines don’t grow from the prairie soil because some leader from on high hath decreed it.

Unless the NDP has a plan to incentivize this kind of development, or to create it wholesale at the taxpayers’ expense, they haven’t cornered some novel policy. Mr. Mulcair deserves some credit, but these types of pronouncements make him look economically ill-informed in a way that he shouldn’t be, and perhaps isn’t. His analysis creates the impression in Alberta that he must be taking his current political tack, not because he’s innocent of these realities, but because he’s anything but. That he’s playing an old and ugly kind of regional politics.

The NDP might prove to be a champion on environmental issues, but it should consider that if the commodity bubble burst tomorrow (and remember, Canada exports many more commodities than just oil) and our dollar fell to 60 cents, it’s unlikely our manufacturing sector would have some kind of revival. We’d all just be poorer.

National Post

]]>http://news.nationalpost.com/full-comment/jennifer-gerson-mulcairs-economic-theory-has-more-holes-than-an-alberta-oil-field/feed0stdWhat the #!%*? is the ‘Dutch disease’ exactly and does Canada have it?http://news.nationalpost.com/news/canada/what-the-is-the-dutch-disease-exactly-and-does-canada-have-it
http://news.nationalpost.com/news/canada/what-the-is-the-dutch-disease-exactly-and-does-canada-have-it#commentsFri, 18 May 2012 23:19:40 +0000http://news.nationalpost.com/?p=174999

In this occasional feature, the National Post tells you everything you need to know about a complicated issue. Today, New Democratic Leader Thomas Mulcair’s evisceration of the oil sands, which drew the ire of the Western premiers. He said Canada’s strong petro-dollar has cost Canada a half-million jobs, a phenomenon known as Dutch disease. The National Post’s Jen Gerson asks if he’s right.

What is “Dutch disease”?
The term was created by two economists in the ’80s to describe what happens to the economies of some countries when significant natural resources are found. The Netherlands’ discovery of natural gas in the 1960s led to massive de-industrialization. According to the model, a resource boom attracts foreign investment and draws the country’s workers, driving up wages for some. It also inflates the value of the currency. This makes it more difficult for the manufacturing sector to compete as it becomes more expensive to sell goods abroad. In some countries, the sudden discovery of oil or other natural resources has damaged other sectors of the economy, making the country more vulnerable to a bust.

Does Canada have it?
Having Dutch disease is not like being pregnant: It’s a theory, not a diagnosis. The major criticism of Mr. Mulcair’s assertion is that it is ruthlessly simplistic. Some countries have suffered as a result of natural resource discoveries. Others have not. Economists still argue whether Dutch disease is a verifiable phenomenon, much less a problem.

Related

So why is the manufacturing sector in central Canada suffering?
Mr. Mulcair has claimed Canada lost a half-million manufacturing jobs in the last six years as a result of the petro-fueled dollar. Some economists have found this claim to be highly dubious: The state of the loonie can also be attributed to Canada’s strong economy relative to the rest of the world.

“There is certainly a tie between high oil prices and oil exports and the currencies. Nobody’s debating that there’s a link. As well, no one is debating that high currency prices have caused trouble for some exporters, both in Ontario and Quebec and in some of Canada,” said Mike Moffat, an assistant professor at the Richard Ivey School of Business in Toronto. However, “a lot of what’s being blamed on the high currency really has nothing to do with high currency.”

Manufacturing is just not as competitive in Canada as it is in parts of the world where labour is cheap and environmental regulations are lax. These jobs have been moving overseas for decades.

Many of the most recent job losses can also be attributed to local increases in productivity — that is, as factories employ better technology, they need fewer workers.

In addition, right-to-work legislation is pulling manufacturing into the southern U.S. states at the expense of the northern U.S., and Ontario alike.

“If this were a currency issue, Detroit would be booming right now. Detroit is not booming right now,” Mr. Moffat said. “What [Mr. Mulcair] is implying is greatly exaggerated.”

A study released by the Institute for Research on Public Policy this week vindicated this view: It found the impact of petro-based high currency to have less of an impact on manufacturers than feared. According to the study’s authors, Dutch disease had most hurt small, labour-intensive industries like textiles and apparel.

However, another study about to be published in Resource and Energy Economics contends that up to 39% of jobs lost in the manufacturing sector between 2002 and 2007 were the result of the exchange rate.

Andrew Leach, a professor with the University of Alberta who focuses on energy economics, noted bitumen from oil sands is also exported: “A high dollar makes export industries less valuable. So in the Alberta oil industry, we’d be really happy if we could export at a 60-cent dollar. All else being equal, that’s 40% more revenue.”

Is a resource-dependent economy a bad thing?
Processed materials and manufactured goods have long been associated with civilization and advancement. Some economic data, however, suggest Canada can have it both ways: A report on manufacturing released by Statistics Canada this week found manufacturing is on the rise, bolstered by growth in the oil and coal sectors.

But resource-extraction plays to the country’s strengths. Canada has a relatively small, well-educated and well-paid population. It may not make sense for a country of 33 million to compete as a major manufacturing base with China.

What Canada does have is lots of oil, fish, minerals and lumber. Further, the country has a financial sector in Toronto that can develop an expertise in financing the things Canada does well.

In March, Jim Prentice, the former federal industry minister and a vice chairman of CIBC, suggested the country re-focus itself accordingly. Ontario should not give up its manufacturing, in fact, it should thrive: “Where better to build the high-value components required than right here in Ontario?” he asked a Toronto crowd. “Who is better able to manufacture the steam generators, the turbines and the electronics than workers in this province?”

Over the next quarter century, he said, it is estimated that Alberta energy companies will purchase more than $55-billion worth of goods from Ontario — the latter province stands to gain more than any other outside Alberta by the resource boom.

Zimbabwe, here we come!The Toronto Star‘s Chantal Hébert notes a distinct lack of logic in the list of ridings allegedly targeted by dodgy campaign telephone calls, and in the list of those nottargeted. “Liberal ridings such as Brampton-Springdale and Ajax-Pickering that were known to be high on the Conservatives’ to-win list (and that they did win) were apparently not plagued by such calls,” she observes, while several dead-cert Tory ridings apparently were — as apparently were no-hope Tory ridings like Parkdale-High Park. She then observes that the New Democrats share an “addiction … to robo-calling” as a tool of “harassment,” citing calls made to Dipper apostate Lise St-Denis’ constituents that redirected recipients to her riding office if they expressed displeasure with her defection. That’s interesting and all. We’re just not sure the St-Denis calls, greasy as they were, can really be mentioned in the same breath as flat-out electoral fraud … unless Hébert is trying to insinuate a, shall we say, more complex theory behind the election robo-calls. In which case she’s being too subtle for our philistine minds to comprehend.

The Ottawa Citizen‘s Dan Gardner notes that in the search for ever more instances of inappropriate campaign phone calls, there is a high risk of false positives born of partisanship, fallible memories and the very nature of the human mind. “Many people’s memories of phone calls received during the election will adjust to fit their current perception of what happened during the election,” says Gardner. “That’s Psych 101. They will have recollections that are clear, compelling, and wrong.” The only answer to this is a “painstaking investigation” by a politically untainted party, and in Gardner’s view neither Elections Canada nor the RCMP is that party. Bring on the inquiry. It’s a pretty compelling (and depressing) argument, we have to say. The RCMP is a mess, and Conservatives will wave away anything Elections Canada discovers that goes against them as part of the Grand Conspiracy.

The National Post‘s editorialists have also seen enough to demand a public inquiry. Regardless of the practical effect of the robocalls, they say “the underlying ethics” remain just as problematic, and must be exposed to sunlight.

The Calgary Herald‘s Licia Corbella thinks Robocon is very serious indeed, and that Conservatives should disabuse themselves of any notion that Vikileaks will make it go away. But she begins her column, strangely, by saying the scandal “doesn’t have a catchy moniker yet, like most good scandals, but it likely will soon.” Where has she been? It’s called Robocon. Andrew Coyne moved the motion, Twitter seconded, and therefore it is law.

When we saw the headline on the Herald‘s editorial — “This is not Zimbabwe” — we assumed it would take opposition MPs to task for their Robocon hyperbole. Instead, it warns Stephen Harper that if he “doesn’t want to be perceived as Canada’s version of Robert Mugabe, he and his party have no choice but to co-operate fully with the joint Elections Canada-RCMP investigation underway.” Yikes.

And finally, the Sun Media editorialists suggest everyone be quiet until the investigation runs its course. But they are quite certain nothing untoward occurred because 900,000 more people voted in the 2011 election than in the 2008 election. This would be some pretty dubious reasoning even if 18-and-up population hadn’t grown by 1.2 million over that time, and if there hadn’t been 600,000 more electors on the lists.

Briefly departing the Land of Hyperbole, Postmedia’s Andrew Coyne issues another plea for sane parliamentary discussion on Old-Age Security. Surely this time they’ll listen.

“Submarines may” — note may — “be a useful addition to our battery of defences,” the Post‘s John Ivison writes in a very good piece. “But only if they work,” which ours tend not to. “And not at any cost,” which is roughly what we’re paying now. The military’s insistence on the subs’ indispensability is belied, Ivison suggests, by the fact that we haven’t had what the military considers “full operational capability” for a decade and nothing bad seems to have happened. Considering the state of the national finances, he sees no reason not to consider selling them for scrap. Or — we’re just brainstorming here — dragging them as far up the Thames as we can on a foggy night and just leaving them to rust.

The West wants blood“Ontario premiers never change,” the Herald‘s Don Braid says of Dalton McGuinty’s complaint that Albertan oil is keeping the Canadian dollar too high for Ontario’s liking. “We’re just lucky that Canada did.” Zing! While Alberta Premier Alison Redford would of course appreciate McGuinty’s and the other premiers’ support as she attempts to rehabilitate the oil sands’ image, Braid argues (and the Edmonton Journal‘s Graham Thomson agrees) that “there’s nothing like the old Ontario pinata to get Alberta PCs swinging their sticks during an Alberta election campaign.”

It’s human nature to want to avoid admitting mistakes, and the bigger the mistake, presumably, the bigger the temptation to escape the blame.

Far easier to blame someone or something else, preferably some force beyond one’s control. I couldn’t do my homework because the dog ate my notes; sorry I missed the deadline but there’s a traffic jam on the highway; I remembered your birthday but the package didn’t arrive in time; I wouldn’t have ruined the economy but the dollar is too high.

That last humdinger was offered Monday by Ontario Premier Dalton McGuinty in a bid to slough off responsibility for the economic mess now confronting the province he has led for the past eight years. Politely invited by Alberta’s Premier Alison Redford to lend support to her province’s effort to defend its oil industry — which has been a key reason Canada has avoided recession — Mr. McGuinty responded with a churlish refusal. Instead he sought to explain away Ontario’s slow slide into debt and deficit as the result of a stronger currency.

Starting in 2003 — conveniently enough, the year he became premier — strong demand for Canadian energy began pushing up demand for the dollar, he said. That in turn made exports of Canadian products more expensive.

“What does that mean?” McGuinty asked. “It means that the high Canadian dollar — and it’s high because of the price of oil and gas in the West — is hurting the Ontario economy.” As a result, “If I had my preferences as to whether we had a rapidly growing oil and gas sector in the west, or a lower dollar benefiting Ontario, I can tell you where I stand — with a lower dollar.”

So there you go. In March Mr. McGuinty’s finance minister, Dwight Duncan, will bring down the ninth successive budget under a Liberal government, yet if we are to believe Mr. McGuinty it’s all been for nought, due to the strengthening of the dollar. In that time the provincial economy has fallen from among Canada’s strongest to one of its saddest: increasingly dependent on equalization payments and other handouts from the federal government, which Mr. Duncan now regularly complains are inadequate for his needs. Unemployment, at over 8%, rivals the U.S. and Britain. The deficit, now at $17 billion, could reach $30 billion in five years according to a recent analysis by economist Don Drummond. The debt, now at $250 billion, is spiralling with every year of added borrowing.

But, in Mr. McGuinty’s view, none of it is his fault. Nothing he could do. Blame Alberta for having an oil and gas industry. If not for that, Ontario might still have a manufacturing sector to be proud of, and the ability to continue lording its wealth over other, lesser provinces.

Not only is Mr. McGuinty’s reaction childish and unbecoming an elected Premier, his reasoning is shallow. Last time we looked, the Canadian dollar was used in all 10 provinces and the territories, meaning everyone is dealing with the same set of issues. Presumably Mr. McGuinty also resents Saskatchewan for having potash, British Columbia for having fish and trees, Quebec for having hydro power and Newfoundland for discovering offshore oil. And how about those Rocky Mountains: If Ontario had Rocky Mountains, it could have a big tourist industry too. Unfair, unfair!

Apart from the speciousness of his reaction is the simplistic nature of his reasoning. As Calgary Herald columnist Don Braid points out, “McGuinty’s knowledge of western economics is truly dim if he really thinks natural gas prices are driving up anything but medication bills for Alberta producers. And the high dollar, of course, doesn’t hurt just eastern manufacturers. It’s trouble for western exporters of just about anything, including oil and gas. When the buck goes up one penny for a year, the Alberta treasury loses $247 million. The flip side of this petro-coin is that companies can buy equipment and goods from the United States for good prices. That’s an advantage in Ontario as much any western province.”

But above all is the narrow, pinched, myopic nature of Mr. McGuinty’s understanding of Canada. Rather than embrace the good fortune of a country blessed with abundant natural resources, and the great benefits those brings to all Canadians, he chooses to begrudge other provinces their advantages and blame them for his own province’s decline. Canada to Mr. McGuinty apparently consists of 13 or 14 separate governments, all in competition with one another to get a leg up, and beggar their neighbour whenever they get the chance. If Canada’s founders had shared Mr. McGuinty’s blinkered view, Confederation would never have happened. In all the years Ontario was Canada’s economic engine (before Mr. McGuinty became premier), the other provinces would have been justified in shrugging off whatever economic malaise befell them on the basis that Ontario was at fault in being such a success.

Ontarians should be deeply disappointed in Mr. McGuinty, not only for the peevish nature of his reaction but for the ill omen it carries for the future. Recently re-elected to another four-year term, he appears to have no idea how to address the crisis he faces. Mr. Drummond’s report included 362 recommendations to revive the economy; thus far Mr. McGuinty has found only one he can swallow, a proposal to quit sharing slot machine revenues with horse-race tracks. As an example of failed leadership, it’s hard to beat. Ms. Redford may find she’s better off not being chained to what’s left of the Ontario of old. As long as Mr. McGuinty continues to rule over its shell, it will evidently have little to offer the country.

The economic slanging match over the closing of a 450-worker Caterpillar plant in London, Ont., follows standard Canadian ideological patters. Mostly, though, it can be reduced to a one-track battle waged by the unionized ideological left against the rest of the world — against corporate power, greedy management, foreign investment, spineless governments and — according to the Toronto Star’s Tom Walkom on Wednesday — something called “mindless free trade.”

Beyond the Caterpillar story, however, a much bigger development seems to be unfolding. The squeeze on Canadian manufacturing in Ontario and elsewhere is being offset by reports of a resurgence in the United States. A Wall Street Journal story Wednesday lists a score of U.S. corporations that are boosting investments at home. Emerson Electric, Cummins, automakers and other companies are expanding operations and hiring workers in manufacturing.

Is there a trend building? Carlisle Companies, maker of insulation, tires and restaurant equipment, plans to open up two new plants in the United States and bring tire production back to the U.S. from China. “We find it as cheap to manufacture in the U.S. as China,” said Carlisle’s CEO Dave Roberts.

Mexico confirms it has foiled a plan to smuggle Saadi Gaddafi’s into the country

Canadian consultant Cynthia Ann Vanier was ‘leader of smuggling network’

AFP PHOTO/Vincenzo PINTOSaadi Gaddafi in 2003.

Exclusive by Stewart Bell and Natalie Alcoba

After Libyans turned against Colonel Muammar Gaddafi in February, his playboy son Saadi made plans to flee to a Mexican beach resort whose celebrity visitors include Kim Kardashian, Charlie Sheen and Lady Gaga.

Although the United Nations had frozen Saadi Gaddafi’s assets and banned him from crossing borders because of his close ties to the Libyan dictatorship, a multi-million-dollar refuge awaited him in Punta Mita, a posh development near Puerto Vallarta on Mexico’s Pacific Coast.

To get him there, a Canadian company, Can/Aust Security and Investigations International, approached private security contractors in Ontario, offering $1,000-a-day to join the team that would pick up the 38-year-old Gaddafi and fly him, his wife and children out of Libya

Canadian Cynthia Vanier is the accused ringleader of the plot that included opening fake bank accounts and acquiring various properties in Mexico that would act as safe houses for the Gaddafi kin. Two Mexicans and a Dane are also alleged to have taken part in the operation, which authorities first learned of in September.

The estate is not in Gaddafi’s name and local realtors said they had not heard about it. But Can/Aust CEO Gary Peters told the National Post he was involved in the operation to bring the Libyan dictator’s third son to the Punta Mita property.

Mr. Peters said he had been to the property twice — once to view it and again when it was handed over. He would not identify it further, saying he did not want people snooping and that it likely would be sold soon anyway.

He said the plan was to be conducted with the approval of the Mexican government, which was to supply the required documentation. There is no evidence Mexican authorities had considered granting the family permission to resettle in Mexico.

Confirming Wednesday’s National Post exclusive, Mexican authorities announced today that they had foiled a plan in September to smuggle Saadi other Gaddafi family members into the country.

Interior Secretary Alejandro Poire said intelligence officials uncovered the plot at the height of pro-democracy protests in the north African nation to bring Saadi and other relatives into Mexico on false papers.

Suspecting the group of organized crime, falsification of documents and human trafficking, authorities detained Ms. Vanier in Mexico City, on November 10 and rounded up her alleged accomplices the following day, said Mr. Poire.

Ms. Vanier, of Vanier Consulting in Mount Forest, is alleged to have been the direct point of contact with the Gaddafi family, and in charge of financing the operation.

Gabriela Davila Huerta, who may also go by the name Gabriela Davila de Cueto, a Mexican living in the United States, was the alleged point of contact with false document makers, Jose Luis Kennedy Prieto, also a Mexican citizen, was allegedly in charge of obtaining documentation and Dane Pierre Christian Flensborg allegedly the head of logistics.

“It is of no surprise that Mexico was considered to be a hideaway for this international criminal,” Mexican security expert Alberto Islas said of Gaddafi. “Mexico has a long way to go in border control and money-laundering actions if it wants to be considered part of a North America alliance.

“Puerto Vallarta and the state of Jalisco has been home to some of the most dangerous drug traffickers,” said Mr. Islas, an analyst at the Mexico City-based consulting firm Risk Evaluation Ltd. “A foreigner with armed bodyguards would not have stood out in the city.”

Punta Mita is a “sensual and secluded 1,500-acre peninsula that dazzles your eye, transports you from the familiar and reconnects you with yourself,” according to the website puntamita.com.

It is “surrounded on three sides by turquoise waters and nine and a half miles of varied coastline … overlooking the Marietas Islands, where elusive blue-footed Booby birds fly, and divers thrill to underwater caves and kaleidoscopic coral reefs.”

Reuters filesFormer Libyan President Muammar Gaddafi

Since ousting Col. Gaddafi with the help of NATO, the National Transitional Council has been trying to trace the billions worth of assets the late dictator, his family and associates held around the world. About $2.2-billion worth of Libyan assets are held by Canadian institutions.

The Canadian Libyan Council said if members of the Gaddafi family own the Mexican property it should be considered an asset to be returned to the Libyan people. “Any institution, private individuals or governments who accept money from the Gaddafi family is to be held accountable through the international community, as this is unacceptable,” said Council spokeswoman Amal Abuzgaya.

She said Saadi Gaddafi’s “lavish lifestyle” had come at the expense of Libyans. “The expenditure of the Libyan peoples’ money is unacceptable and needs to be returned back to the Libyan people via their transitional government.”

Col. Gaddafi, who was killed by rebel forces on Oct. 20, had eight children. His second son, Saif al-Islam, was caught last month and faces trial before the International Criminal Court. Three others are dead and three fled to neighbouring Algeria.

Known for his high-flying lifestyle, Saadi Gaddafi played professional soccer and served in the Libyan special forces before turning his attention to engineering and business, including a Hollywood movie company.

Bloomberg NewsPunta Mita is described as a 1,500-acre peninsula that “dazzles your eye.”

He visited Canada regularly and spent three months in Montreal and Toronto in 2008. He returned the following year for the Toronto International Film Festival. Security contractors who guarded him in Canada were alarmed by his appetite for drugs and prostitutes.

After the start of the Libyan revolution last February, Mr. Peters contacted the bodyguards who had protected Gaddafi at the film festival and asked if they wanted to work for him again, this time to extract the dictator’s son from Libya, but they turned him down.

Gaddafi’s lawyer did not respond to a request about the property. It is unclear why the Mexico escape plan was never carried out. (Venezuela and Barbados were also discussed as possible countries of refuge.)

Possible complications included a travel ban the United Nations imposed on Feb. 26, alleging Gaddafi was a commander of “military units involved in repression of demonstrations.”

Interpol issued an Orange Notice on March 4 warning that members of the Gaddafi regime, including Saadi, “may attempt to travel or to move assets, which would constitute a threat to both the civilian population in Libya and in other countries.” The UN froze Saadi Gaddafi’s assets in March.

On July 17, Mr. Peters, who lives in Cambridge, Ont., and Cynthia Vanier of Vanier Consulting in Mount Forest, Ont., travelled to Libya on what she called a fact-finding expedition. They flew in a Hawker 800 executive jet contracted from Veritas Worldwide Security, a U.S. company run by a retired U.S. Marine.

After 10 days in Libya, they returned to Canada and Ms. Vanier sent a report outlining her findings to CANADEM, an Ottawa-based non-profit group with which she was affiliated. She asked that the report be forwarded to the Department of Foreign Affairs.

Screen Grab from the Punta Mita websiteThe Punta Mita website highlights a surfing trip from Lady Gaga at the resort.

Those who have seen the study said it reflected a view of the Libyan conflict that the Gaddafi regime was promoting at the time, alleging that NATO and the Libyan rebels were committing atrocities and war crimes.

Foreign Affairs said the study was “circulated at the officer level” and had no impact on Canadian policy. CANADEM, which matches humanitarian workers with agencies seeking their expertise, has now severed its ties with Ms. Vanier.

As Tripoli fell to the Libyan rebels in August, Saadi Gaddafi fled. The rebels captured his beachfront villa and found a Lamborghini, Audi, BMW and Toyota and catalogues for yachts and cars. The compound had a soccer field and an underground escape tunnel.

He went overland to Niger, where he was granted asylum. Mr. Peters has said he took part in the escape. Interpol has since issued a warrant for Saadi Gaddafi’s arrest, saying he is wanted for “allegedly misappropriating properties through force and armed intimidation.”

He has denied any wrongdoing and wants the Interpol warrant dropped.

Ms. Vanier was arrested in Mexico City more than three weeks ago and remains in custody, along with two business partners of Gregory Gillispie, the California man who supplied the plane for the July Libya trip.

“We were told that there’s absolutely no evidence of wrongdoing against my two partners,” Mr. Gillispie said.

“We didn’t traffic any human beings because it’s listed on the flight manifest who all was on the aircraft,” he said.

He said his dealings with Ms. Vanier began when his company was contracted to provide a jet to take Ms. Vanier and Mr. Peters to Libya. When she did not pay the balance of the contract, he and one of the partners arrested in Mexico flew to Canada to discuss the matter with her, he said.

“That’s when we met this Gary Peters and the other guy,” he said.

He said Mr. Peters was accompanied by a man from New Zealand.

A retired Marine whose exploits during the first Gulf War were documented in the book Storm on the Horizon, Mr. Gillispie said he was not impressed with the men. “When we met Cyndy, and these two guys that were with her, I mean we were all rolling our eyes. It was like, holy cow, what a bunch of bozos.”

He said Ms. Vanier told him she needed to conduct nine more fact-finding missions over the next year and that she was looking for an extended contract for aircraft. Mr. Gillispie said he and his partner agreed to provide a Gulfstream jet.

Ms. Vanier had subsequently asked to meet in Mexico City in early November, he said. During the meeting, he said federal police arrested all four of those present. Mexico can hold suspects for 40 days while police investigate.
National Post with files from AFPsbell@nationalpost.com

]]>http://news.nationalpost.com/news/saadi-gaddafi-planned-escape-to-luxurious-home-in-trendy-punta-mita/feed42stdA man relaxes in Punta Mita, Mexico, a vacationer's paradise that was the intended destination of Saadi GaddafiSaadi GaddafiToronto-NA1207-PUNTA-MITAMuammar Gaddafi (Reuters files)Punta Mita is described as a 1,500-acre peninsula that “dazzles your eye.”gagaGary Peters at the Libyan-Tunisian border.Huge growth in public servants under Torieshttp://news.nationalpost.com/news/canada/huge-growth-in-public-servants-under-tories
http://news.nationalpost.com/news/canada/huge-growth-in-public-servants-under-tories#commentsWed, 30 Nov 2011 03:20:22 +0000http://news.nationalpost.com/?p=114556

By Jason Fekete

OTTAWA — As the federal Conservative government searches for billions of dollars in budget cuts, it does so knowing the federal public service has swollen by one-third over the past decade — far outpacing the growth in the population.

Briefing notes prepared for Treasury Board president Tony Clement — who is leading the multibillion-dollar review of government programs — show federal public service employment grew at an average of nearly three per cent a year between 2000-01 and 2010-11.

The documents, obtained by Postmedia News in an access to information request, note the population of the federal public service (core public servants) soared 34 per cent over the past decade, to 282,955 last year from 211,925 a decade earlier. The increase is nearly 40 per cent if you compare it to the number of employees in the late 1990s.

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At the same time, the Canadian population increased approximately 11 per cent to almost 34 million people in 2010, compared to around 30.5 million in 2000.

The federal bureaucracy was slashed during the former Liberal government’s sweeping program review in the mid- to late 1990s, which also instituted a hiring and wage freeze on government. Total federal public service employees dropped to around 204,000 in 1998 from more than 250,000 in the early 1990s, say the documents.

However, the number of public servants has soared over the past decade or so, especially during the nearly six years the Harper government has been in office.

“Between the end of ‘Program Review’ and 2010, the federal public service population increased by 39 per cent and is now 13 per cent larger than what it was two decades ago,” say the briefing notes, which were provided to Clement in the spring.

“From 1990 to 2000, all regions of Canada saw declines in federal public service employment levels,” the documents say. “Since then, all regions have posted employment gains.”

By far, the largest gains have come in the National Capital Region around Ottawa, with the growth in jobs coming from knowledge-based positions in several categories: executive; economics and social sciences; computer systems; and law.

Despite recent growth trends, the number of federal public servants per 100 Canadians is lower now than it was prior to the program review in the 1990s, according to the notes. In 2010, the public service comprised 0.83 per cent of the Canadian population, which remains below the figure from the 1980s and early 1990s of close to one per cent.

The size of the total federal public sector (which includes core public servants as well as the RCMP, Canadian Forces personnel and Crown Corporations) has grown 25 per cent, to more than 530,000 employees in 2010 from around 423,000 a decade earlier.

Clement is leading an ongoing operating review that is searching for $1 billion in cuts for the next fiscal year, $2 billion for 2013-14, and $4 billion by 2014-15. Nearly 70 government departments and agencies are required to submit scenarios for a five- and 10-per-cent cut to their budgets.

The government is relying on the savings to help eliminate a $31-billion deficit by 2015-16 at the earliest, a year later than initially hoped.

Clement was unavailable for comment on Tuesday, but has promised in recent days that the federal government won’t be dogmatic in its cost cutting. He said the government hasn’t made any final decisions on cuts, although some of them are expected to be unveiled in the spring budget.

“We’re not looking at it from an ideological point of view. We’re looking at it from a common sense point of view to see whether there’s a practical, pragmatic way to deliver better services to Canadians,” Clement said late last week at a House of Commons committee meeting.

Since the Conservatives took office in 2006, some of the federal departments and agencies with the largest absolute growth include the Department of National Defence (nearly 5,000 more employees), Correctional Services Canada (more than 3,000 new workers) and the Canada Border Services Agency (close to 2,600 more employees).

The fastest-growing departments in percentage increase since 2006 include the Canadian Nuclear Safety Commission (62 per cent), Treasury Board Secretariat (61 per cent) and Canada School of Public Service (57 per cent).

“There has obviously been a radical increase in the head count of the federal public service,” said Gregory Thomas, federal director of the Canadian Taxpayers Federation.

The spending watchdog is calling for direct job cuts but cautions the government about slashing some positions and then having to pay severance and rehire in the coming years.

“Cut deep, cut hard. Canada needs a balanced budget way more than it needs a bunch of pork barrelling regional development programs from Ottawa,” he added.

Some observers say public sector job cuts are probably needed, but they urge the government to carefully consider the economic fallout on communities.

Government employees provide valuable services to Canadians but also spur local economies by purchasing homes and vehicles, noted Edward Jackson, associate professor in the School of Public Policy and Administration at Carleton University in Ottawa and a frequent adviser to governments.

Moreover, the government must consider renewing the public service with talented people, not simply cutting any fat in the bureaucracy, he said.

“I’m sure there are things to cut. There’s no question it’s a time to really look hard at these things,” Jackson said.

“But if you lose good quality jobs in this economic context, I’m not sure you’re doing the Canadian economy any favours.”

Postmedia News

]]>http://news.nationalpost.com/news/canada/huge-growth-in-public-servants-under-tories/feed11stdCanadian Prime Minister Harper gives a speech during the concluding session at a pre-summit business forum ahead of CHOGM in Perth